December 31, 2013

Our Mini-Theme: Recent Topics from the 2013 LLC Institute

Thomas E. Rutledge

In nearly every state, including Delaware, more limited liability companies and other unincorporated business ventures are organized than are traditional business corporations. These forms of business, the LLC, the general partnership, the limited partnership, the business/statutory trust, and other unincorporated forms, are the subject of the LLCs, Partnerships and Unincorporated Entities Committee. We focus on matters both internal to these structures, such as the variable fiduciary duties that exist in them, and as well, their relationship to many other areas of law including taxation, bankruptcy, securities regulation, etc. 

In October of this year, the Committee sponsored the Second Annual LLC Institute. Following on the inaugural meeting in 2012, the LLC Institute was two full days of high-end presentations on these and similar matters. It was also at the 2013 LLC Institute that the Committee had the honor of presenting to Professor Elizabeth S. Miller (Baylor Law) the 2013 Martin I. Lubaroff Award in recognition for her unparalleled contributions to this area of the law. 

We are glad to highlight the activities of the 2013 LLC Institute with this collection of articles. Professor Brad Borden of the Brooklyn School of Law, along with Brian O'Connor (Venable LLP – Baltimore, Maryland) and Steve Schneider (Goulston & Storrs PC – Washington, D.C.), have submitted “Avoiding Adverse Tax Consequences in Partnership and LLC Reorganization,” a useful primer on the numerous exceptions to the rules of non-recognition typically applicable under Subchapter K. Still in the tax world, Andy Immerman (Alston & Bird LLP – Atlanta, Georgia) and Joe Mandarino (Stanley, Esrey & Buckley – Atlanta, Georgia) submit their thoughts on “Selling LLC Interests: The Tax Consequences May Not Be What You Expected,” another piece cautioning against the all too often knee-jerk belief that selling an interest in an entity taxed as a partnership will be tax-free. 

“Rationalization” is a hot topic in this area, one aiming, depending on your viewpoint, either upon the elimination of nonsensical distinctions between organizational forms or, on the other hand, the inappropriate melding of distinct organizational structures whose value is the fact that they are different from the other forms. Reviewing various aspects of this debate is a pair of papers presented by, respectively, Professor Mark Loewenstein (University of Colorado at Boulder) and Professor Joan Heminway (University of Tennessee, Knoxville) each titled “Rationalizing Entity Law: Corporate Law and Alternative Entities.” 

If you find these articles helpful, please know that all of the program materials from the 2013 LLC Institute are available on the Committee’s website. If you are practicing in this area, we hope you will join the Committee. If you are already a member of the Committee, we hope you will become more involved in our activities. In the meantime, we will be presenting three programs at the 2014 BLS Spring meeting in Los Angeles and we hope to see you there.

Additional Resources

For other materials on this topic, please refer to the following.

The LLC & Partnership Reporter

September 2013 - Volume XXX, No. 2

Business Law Today

Eliminating Fiduciary Duty Uncertainty: The Benefits of Effectively Modifying Fiduciary Duties in Delaware LLC Agreements
By Paul M. Altman, Elisa Erlenbach Maas, and Michael P. Maxwell
February 2013

Exit Stage Left: Getting out of Your Limited Liability Company
By Tarik J. Haskins
July 2013 

Fiduciary Duties of Managers of LLCs: The Status of the Debate in Delaware
By Lewis H. Lazarus and Jason C. Jowers
February 2012

Delaware LLC's and the Implied Covenant of Good Faith and Fair Dealing
By Lewis H. Lazarus and Jason C. Jowers
November 2011 

BLS Programs Material Library

LLC Interests and Securities Law (PDF)
2013 Committee Meeting
Presented by: LLCs, Partnerships and Unincorporated Entities 

Partnership and LLC Reorganizations (PDF)
2013 Committee Meeting
Presented by: LLCs, Partnerships and Unincorporated Entities 

Taxation of Transfers of LLC and Partnership Interests (PDF)
2013 Committee Meeting
Presented by: LLCs, Partnerships and Unincorporated Entities 

2013 Annual Review of LLC Case Law and Recent Developments (PDF)
2013 Spring Meeting
Presented by: LLCs, Partnerships and Unincorporated Entities 

Creditor Remedies against LLCs and LPs Other than Charging Orders (PDF)
2013 Spring Meeting
Presented by: LLCs, Partnerships and Unincorporated Entities 

Practical Estate Planning and Wealth Management with LLCs (PDF)
2013 Spring Meeting
Presented by: LLCs, Partnerships and Unincorporated Entities 


The Times They are a Changin: Business and Tax Planning in 2013 Using Limited Partnerships, LLCs and S Corporation (November 21, 2013)

ABA Web Store

Capital accounts are one of the most misunderstood, yet fundamental, parts of limited liability companies. In this session, learn the importance of capital accounts and how they reflect practical economics of the deal or operating entity. In addition, learn the fundamentals associated with maintenance of the capital account, and how the capital account impacts management.

The program will: define a capital account; explain how capital accounts change and how the changes reflect the economics of the company; compare and contrast capital accounts with basis; and, improve your depth of knowledge of LLCs. 

Model LLC Membership Interest Redemption Agreement
Sponsoring Entity: Business Law Section
Publication Date: April 9, 2009 

The Model LLC Membership Interest Redemption Agreement explores and addresses issues that arise in the drafting of redemption agreements. It does not presuppose applicable redemption provisions in the operating agreement, so it conceives of the terms of this agreement being negotiated between the entity, the redeemed member, and possibly the remaining members.

Thomas E. Rutledge